ZTE agrees to pay $1 billion fine to stop US Denial Order


The U.S. has reached a deal with Chinese telecom giant ZTE, but the company will have to pay up and make some major business changes, according to Commerce Secretary Wilbur Ross.

Before April 16, a settlement with Washington keeping the ban from going into effect had been in place since March 2017, after ZTE agreed to punish those responsible for covering up its sales to Iran and pay about two-thirds of a US$1.2 billion penalty.

Finally, while no agreement has been officially inked, the sources in the Reuters article did say ZTE has finished all of its signatures and that the us just needs to finalize the deal.

Chinese telecom giant ZTE said its major operations had ceased following last month's U.S. ban on American sales of critical technology to the company.

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The ban in effect nearly destroyed ZTE as it now relies on many components from American companies.

The commerce secretary said he did not think the settlement of the ZTE dispute would have any impact on ongoing contentious trade and tariff talks between the USA and China, the world's two biggest economies.

ZTE did not immediately respond to requests for comment. ZTE was assessed US$2.29 billion in civil and criminal penalties by the Commerce Department and other USA agencies since past year.

While the details of last weekend's deal have yet to be revealed, it is understood that ZTE has promised to replace its board and executive team in 30 days. ZTE reached an agreement to turn over $1.19 billion and punish executives involved in the scheme, but in April the USA determined that the company hadn't lived up to its promises.

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Critics like senator Marco Rubio have criticized the Trump administration's willingness to cut a deal with ZTE, saying it undercuts U.S. national security. Ross added that if the company violates the new agreement, it could also be put under denial of export privileges again, too. Under the terms of its guilty plea, ZTE paid $890 million in fines, and agreed to fire some senior staff, and strip bonuses from 35 others. Some US lawmakers are already hatching a plan to scuttle the new deal and restore sanctions that stopped US firms from sharing technology and expertise with the company.

As part of a new agreement, the sources said, ZTE will retain another compliance contractor in addition to the three-year court-appointed monitor imposed by the plea agreement.

Since the decision came into force last month, President Donald Trump has appeared to open the door on a compromise after announcing on Twitter that he would help the group "get back into business".

"At about 6:00 A.M. this morning, we executed a definitive agreement with ZTE and that brings, that brings to a conclusion this phase of the developing with them", Ross said in an interview with CNBC. But Reuters reports that ZTE and the United States government have signed a preliminary agreement that will lift the Denial Order. They will simply monitor the compliance of the company with the US export control laws.

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The announcement boosted shares in U.S. component makers including Acacia Communications, Oclaro and Lumentum Holdings. Of those, $1 billion is the fine and $400 million will be in escrow in case of future transgressions.